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US stock market closes higher, Dow Jones gains 1.37%



At the close of the New York Stock Exchange, the Dow Jones rose 1.37% to hit a monthly high, the S&P 500 rose 2.62% and the NASDAQ Composite rose 4.06%.

Shares of Microsoft Corporation led the way among the components of the Dow Jones index in today's trading, which gained 16.84 points (6.69%) to close at 268.74. Salesforce.com Inc rose 9.84 points or 5.77% to close at 180.30. Walmart Inc rose 4.61 points or 3.78% to close at 126.59.

The biggest losers were 3M Company, which shed 1.89 points or 1.34% to end the session at 138.86. The Travelers Companies Inc was up 1.90 points or 1.18% to close at 158.96, while Visa Inc Class A was down 2.02 points or 0.95% to close at mark 210.47.

Leading gainers among the components of the S&P 500 in today's trading were Enphase Energy Inc, which rose 17.89% to hit 254.77, Chipotle Mexican Grill Inc, which gained 14.70% to close at 1.00. as well as PayPal Holdings Inc, which rose 12.18% to end the session at 86.42.

The biggest losers were Sherwin-Williams Co, which shed 8.78% to close at 231.97. Shares of Garmin Ltd lost 8.72% to end the session at 93.56. Quotes of Teledyne Technologies Incorporated decreased in price by 7.01% to 372.01.

Leading gainers among the components of the NASDAQ Composite in today's trading were Blue Water Vaccines Inc, which rose 53.17% to 3.14, Cryptyde Inc, which gained 43.70% to close at 1.27, and also shares of QualTek Services Inc, which rose 37.78% to end the session at 1.35.

The biggest losers were ObsEva SA, which shed 75.40% to close at 0.40. Kalera PLC lost 20.77% to end the session at 2.48. Quotes Burcon NutraScience Corp fell in price by 18.06% to 0.59.

On the New York Stock Exchange, the number of securities that rose in price (2573) exceeded the number of those that closed in the red (519), while quotations of 108 shares remained virtually unchanged. On the NASDAQ stock exchange, 2,854 companies rose in price, 916 fell, and 174 remained at the level of the previous close.

The CBOE Volatility Index, which is based on S&P 500 options trading, fell 5.87% to 23.24.

Gold futures for August delivery added 0.86%, or 14.70, to $1.00 a troy ounce. In other commodities, WTI crude for September delivery rose 3.35%, or 3.18, to $98.16 a barrel. Brent oil futures for October delivery rose 3.00%, or 2.98, to $102.44 a barrel.

Meanwhile, in the Forex market, EUR/USD rose 0.84% to hit 1.02, while USD/JPY shed 0.30% to hit 136.51.

Futures on the USD index fell 0.68% to 106.31.

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USD tactics and strategy: we need to retreat in order to put the euro's vigilance to sleep



At the end of this week, the US currency partially lost its position, giving way to the European one. However, some analysts believe that this is a clever tactical move on the dollar's part. The latter has to use a withdrawal strategy to distract the attention of the euro and give it a false sense of superiority.

According to experts, the greenback can afford to retreat, since its position in the global financial arena is quite strong. A short-term redistribution of forces in favor of the euro will not prevent the USD from reaching new heights. Currently, the greenback has sunk a bit, but soon financial fortune will smile on it, experts believe.

A short-term pullback of the US currency occurred after the Federal Reserve meeting, following which the central bank increased the interest rate by 75 bps, to 2.25-2.50% per annum. This decision coincided with market expectations, although some feared aggressive steps on the part of the Fed, namely raising the rate by 100 bps. However, the central bank prefers to move gradually, believing that in this way it will be able to control inflation.

At a press conference that took place after the central bank meeting, Fed Chairman Jerome Powell expressed readiness to further raise the rate if circumstances require it. According to Powell, the scale of the next hikes may be reduced in the event of a slowdown in inflation. According to Powell, as the monetary policy is further tightened and inflation is curbed, it is advisable to slow down the pace of the rate hike.

Market participants reacted positively to this information, considering that the central bank will limit itself to raising the rate by 50 bps at the September meeting. Note that the Fed currently adheres to the toughest strategy of raising rates over the past 40 years. Earlier, after the global financial crisis of 2008, the American economy was much harder to bear even a slight increase in rates. Now the situation has improved, despite its decline by 0.9% year-on-year and the decline in US GDP.

Against this background, the EUR/USD pair remained stable and was trading near 1.0220 on Thursday, July 28. The pair managed to maintain an upward momentum for a long time, which was occasionally interrupted. The EUR/USD pair was trading at 1.0242 on Friday morning, July 29, significantly strengthening its positions. According to analysts, the pair is currently in a consolidation phase, and in the next few weeks it will remain in a wide range of 1.0100-1.0285.



The euro made a sharp turn after the Fed meeting, taking advantage of the weakening of the greenback. This was due to the central bank's actions, which led to an increase in demand for high-yield assets, while politicians focused on curbing inflation. However, the euphoria in the markets did not last long, especially among euro bulls. Economic problems in the European Union, primarily related to gas supplies, put serious pressure on the euro. The cherry on the cake was the fall of the EU economic sentiment indicator. It should be noted that this indicator fell to 99 points in July, which is worse than the predicted 102 points. At the same time, the level of consumer confidence in the eurozone decreased to -27 from the previous -23.8.

An additional factor of pressure on the euro was the preliminary assessment of the German harmonized consumer price index. In July, this indicator showed an increase of 8.5% Y/Y, which is higher than the previous value of 8.2%. At the same time, the annual CPI of the eurozone was 7.5%. Against this background, the EUR/USD pair fell to a threatening low of 1.0113 ahead of the release of macro data from the US, but later managed to recover.

The US monetary authorities just published the first estimate of GDP for the second quarter, which did not meet market expectations. The reason is the contraction of the American economy by 0.9% in annual terms. According to current reports, US GDP has been declining for the second consecutive month. In such a situation, experts declare the onset of a technical recession.

Many economists are sure that at the moment the US economy is gripped by this kind of recession. However, the volume of decline in the American economy (by 0.6% over the past two quarters) is not so frightening compared to the European one. According to analysts, this failure is the result of budget cuts, not a consequence of higher rates. Recall that changes in monetary policy are not immediately noticeable, but their effect manifests itself in about six months. According to the results of the fourth quarter of 2022, you can see the results of current decisions, experts summarize.

In such a situation, the Fed is able to sharply slow down the pace of rate hikes and quickly move to easing the monetary policy. However, this is unlikely now. High inflation, which the central bank is struggling with, requires a tight monetary policy. If negative trends increase in the first quarter of 2023, the US economy may plunge into recession, analysts warn.

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Oil rises in price at the close of the trading session on Friday



As of 20:09 GMT+3, the price of September futures for Brent crude grew by 2.73% to $110.06, October futures - by 2.24% - to $104.11 per barrel, September futures for WTI — by 2.82%, to $99.14. September Brent crude is trading above $110 a barrel for the first time since July 5.

Pressure on quotes is exerted by fears of a recession in the global economy and, accordingly, a decrease in demand for energy resources. At the same time, experts warn that the supply of oil on the market may be insufficient.

Craig Erlam, senior market analyst, noted that oil prices are rising again amid reports that OPEC+ will leave production targets unchanged next month when they meet on Wednesday.

At the same time, since the beginning of the month, quotes have decreased by 4.5% for Brent and 6.6% for WTI. Demand concerns intensified in the markets amid recession risks.

Earlier Friday, Baker Hughes, an American oil and gas service company, released weekly data on the number of operating oil rigs in the US. In the week to July 29, their number increased by six units compared to the previous week and amounted to 605 units.

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Fiery yen: USD/JPY pair continues to inexorably fly into the abyss

[img]https://forex-images.ifxdb.com/userfiles/20220802/analytics62e8be6f62044_source!.jpg[/img]

The US dollar reached another low against the Japanese yen at the beginning of Tuesday. It seems that the worst is yet to come: the technical picture is not in favor of the bulls for the USD/JPY pair.
These days, the Japanese currency is showing the longest growth against the dollar in six months. The rally of the JPY continues for the fifth consecutive session. During this time, the yen rebounded by more than 6% from the 24-year low, which was reached against the dollar in mid-July. The greenback fell against the yen by 0.5% at the beginning of today's trading, to the level of 130.595. This is the lowest level in almost two months.

[img]https://forex-images.ifxdb.com/userfiles/20220802/analytics62e8bf42492a9_source!.jpg[/img]

One of the catalysts for the yen is the news about the possible visit of the Speaker of the US House of Representatives Nancy Pelosi to the island of Taiwan. Official Beijing said that this visit, which poses a threat to China's independence, could undermine the already tense relations between America and China. Concerns about the consequences of the upcoming visit of a member of the US Congress to Taiwan put pressure on Asian currencies (Chinese yuan and Taiwanese dollar), which led to an influx of funds into the safe yen. Also, the Japanese currency continues to strengthen on the general weakness of the dollar. The greenback index dropped to 105.03 points on Tuesday morning, which is a monthly low. The greenback lost its growth momentum last week when the US Federal Reserve raised interest rates by 75 bps for the second time in a row. Strong pressure on the dollar was exerted by the reduction in expectations of aggressive rates of interest rate hikes by the Fed. The situation was aggravated by weak US GDP data published last week. Investors fear that the contraction of the US economy for the second quarter in a row will force the Fed to slow down the pace of tightening its monetary policy. The reassessment of expectations of a Fed rate hike led to a sharp drop in the yield of 10-year US government bonds. So, at the beginning of Tuesday, the indicator plunged to the lowest level since April of 2.53%. Meanwhile, the spread between the real yield of 10-year US bonds and their Japanese equivalents has decreased to 0.80% from more than 1.5% in mid-June. Recall that the yield gap that formed this year between the United States and Japan due to monetary divergence contributed to the rapid fall of the Japanese currency. Since the beginning of the year, the yen has fallen by about 13% against the dollar and remains the worst among the Group of 10 currencies so far. Nevertheless, many analysts are confident in the yen's further ascent against the US dollar. The continuation of the bearish trend of the USD/JPY pair is indicated by the technical picture. Now the asset is sharply declining after the breakdown of the ascending wedge on the daily scale. This usually indicates a loss of momentum in a bullish trend. In addition, for the first time in 11 months, the pair fell to almost a 100-day exponential moving average at 130.29, and the 20-EMA at 135.26 turned downward. All this reinforces expectations of a fall in the dollar against the yen. The relative strength index (RSI), which has settled in the bearish range of 20.00-40.00, also indicates a further decline in the USD/JPY pair.

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American stock indices fell during trading



Investors are also evaluating a new batch of quarterly reports from major US companies. The value of the Dow Jones Industrial Average by 16:45 GMT+3 fell by 0.93% - to 32493.3 points.

The leader of the decline in the index, in addition to Caterpillar, are papers Boeing Co., falling by 2.6%. Only 5 out of 30 companies included in the indicator calculation are trading in positive territory, including Amgen Inc. and Cisco Systems Inc.

Standard & Poor''s 500 has dropped 0.57% since the market opened to 4095.17 points.

The Nasdaq Composite fell 0.4% to 12,319.41 points.

Shares of Uber Technologies jumped 13.7%. The taxi and food delivery company posted a loss again in the second quarter of 2022, although its revenue more than doubled, beating analysts' forecasts.

Papers Activision Blizzard rise in price by 0.2%. The American video game developer in April-June reduced revenue for the third quarter in a row, but the figure was higher than the market forecast.

Quotes of papers Marriott International increase by 0.5%. The operator of the world's largest hotel chain posted a 61% increase in net income in the second quarter on the back of a recovery in the travel industry, with adjusted figures and revenue well above expectations.

Shares of Cowen Inc. rise in price by 7.6%. Canadian Toronto-Dominion Bank has agreed to acquire a US investment bank in a $1.3 billion deal as it continues to expand its presence in the US market.

Capitalization of Caterpillar falls by 5.2%, the company is the leader of decline in the Dow Jones index. The manufacturer of equipment for road construction and mining in the second quarter increased its net profit by 18.4%, but the revenue was slightly worse than experts' expectations.

Market value of KKR & Co Inc. decreases by 4.7%. The American investment firm posted a net loss in the second quarter of 2022 and cut its distributable earnings (cash that can go towards paying dividends) by about 9%.

DuPont de Nemours Inc. fell 1.7%. The American chemical company posted a sharp increase in its second-quarter net income and a 7% increase in revenue, but its third-quarter guidance disappointed investors.

The price of Arconic securities decreases by 7.4%. The American producer of aluminum products in the second quarter of 2022 received a net profit and increased revenue better than market expectations, but worsened its forecast for the year.

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Pound signed the death warrant. And the policy of the Bank of England has nothing to do with it.



The main topic of the day is the increase in interest rates in the UK. If the Bank of England goes on the biggest rise since 1995, the pound will skyrocket. However, its euphoria will be short-lived. Why?

BoE is not omnipotent

Today, the British central bank once again intends to raise interest rates. This will be the sixth increase since December last year.

Recall that at each of its previous meetings on monetary policy, the BoE made a minimum step of 25 bps.

The market is now expecting more hawkish action from the BoE as UK inflation continues to break records. In June, it accelerated to a 40-year high of 9.4%, and so far there is no sign of a peak.

The situation is also aggravated by gloomy forecasts for further price hikes. Many economists are predicting inflation to rise to double digits this year.

In June, the BoE said it would act more decisively if inflationary pressures in the country become more sustainable.

According to analysts, now the BoE has no choice but to fulfill its promise, especially since its colleagues are not dragging their feet.

Since the beginning of the year, the US Federal Reserve has already raised rates four times, and twice - by 75 bps at once.

The European Central Bank only started tightening last month, but its first step was to raise the rate by half a percentage point.

Compared to other central banks, the BoE's policy looks more dovish now. This weakens the pound, as a result of which the cost of living in the country continues to increase.

In order to prevent inflation from taking root in the British economy, the BoE is likely to be forced to go for the largest rate hike in 27 years.

According to many currency strategists, a rise of 50 bps to 1.75% could significantly strengthen the pound's position against the dollar.



GBP/USD is expected to rise above 1.2170 today after the BoE meeting. However, the pound's rise will be short-lived.

The BoE, which launched the tightening mechanism much earlier than other central banks, delayed the process too much, and this allowed the inflation monster to become very strong.

Now, to defeat the monster, a 50 bps increase won't be enough. Inflation will not start to disappear, as if by magic, and BoE can no longer afford a larger increase in the current situation, when the country's economy is on the verge of a recession.

Far from beautiful

The threat of a recession that hangs over the UK economy is the main argument that the BoE will not risk raising rates by 50 bps at today's meeting.

Some experts expect the BoE to continue to act cautiously, as it has been extremely pessimistic in its latest economic growth forecasts. Recall that the central bank does not expect the UK economy to recover until 2025.

If the central bank does indeed raise rates by just 25 bps this month, despite rising inflation, that would further weaken the pound in the near term.

As for the pound's dynamics in the long term, it does not depend at all on what pace of tightening British officials choose now, UBS is certain.

Swiss bank analysts believe that the future of the pound is already predetermined, and it is not at all rosy. According to their forecasts, this year the GBP will fall to historical lows amid an exacerbation of the gas crisis.

According to UBS, Russia will continue to use energy exports as the main means of pressure on the West. The reduction in the supply of Russian blue fuel will cause huge and irreparable damage to the economies of Europe and the UK.

Electricity bills on the peninsula are expected to rise even more by mid-autumn, leading to another surge in inflation in the country and exacerbating the cost-of-living crisis.

In addition, the pound's growth will be limited by the uncertain political environment in the UK.Recall that Prime Minister Boris Johnson resigned in early July, and now the Conservative Party faces a long search for a successor.

Considering all the negative background that will put strong pressure on the British currency in the next few months, UBS sharply lowered its forecast for the GBP/USD pair.

Analysts expect the pound to fall against the dollar to 1.15 in the fourth quarter. The pound was trading at about this level two years ago when the COVID-19 pandemic shook global markets.

The Swiss bank's forecast is rather surprising, as most other experts believe that the currency will stay at 1.22 until the end of the year as the BoE raises interest rates sharply.

UBS also believes that even the biggest increase in almost three decades this month will not give the pound a solid boost and, moreover, will not serve as a long-term driver for it.

Analysts predict that the pound will be able to recover against the dollar only next year. So, the GBP/USD pair will still be trading at the level of 1.18 in the first quarter, and by June it will be able to rise to the level of 1.20.

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American stock indices rise during trading



The number of Americans who first applied for unemployment benefits increased by 6 thousand last week and reached 260 thousand people, according to a report from the US Department of Labor. Analysts, on average, also expected a rise to 260k from the previous week's previously announced level.

For clear guidance, investors should also wait for US nonfarm payrolls (NFP) data for July, expected to reach 250K, up from 372K earlier. It is also important to monitor the global reaction to China's strong military exercises near Taiwan.

The US trade deficit fell by 6.2% in June to $79.6 billion, according to the country's Department of Commerce. According to the revised data, in May, the negative trade balance amounted to $84.9 billion, and not $85.5 billion, as previously reported. Experts on average expected a decline to $80.1 billion.

The value of the Dow Jones Industrial Average by 16:47 GMT+3 rose by 0.03% - up to 32821.17 points.

Standard & Poor's 500 added 0.1% to 4159.39 points.

The Nasdaq Composite increased 0.4% to 12,719.37 points.

U.S. health insurance and services company Cigna Corp. posted a 6% increase in net income in the second quarter and improved its guidance for the full year of 2022. Its shares are up 3.7%.

eBay Inc. stocks cheaper by 4.9%. The world's largest online auction recorded a net loss in the second quarter of 2022 and reduced revenue. However, the latter figure, along with adjusted earnings, beat market expectations.

Papers of Booking Holdings Inc. drop by 4%, although the company that owns various travel planning services returned to profitable levels in the second quarter of 2022 as the market recovered from the coronavirus pandemic.

American oil company ConocoPhillips increased its net profit by 2.5 times in the second quarter due to rising oil prices and increased production and announced its intention to increase payments to shareholders by $5 billion, that is, up to $15 billion. Meanwhile, its shares are depreciating by 1.1%.

Share price of WeWork Inc. decreases by 4.8%. The American co-working service reduced its net loss in the second quarter of 2022 and increased revenue by more than a third, but the figures fell short of analysts' expectations.

Papa John's International is down 1.7%, although the pizza chain owner returned to profitability in the second quarter of fiscal 2022 with a modest increase in revenue and an increase in annual dividends.

Shares of Shake Shack Inc. fall by 13.8%. The American fast food chain again suffered a loss in the second quarter of the current fiscal year, and the company's revenue increased weaker than expected.

Walmart Inc. shares are down 0.3%. The nation's largest retailer is laying off hundreds of corporate management employees as part of a plan to restructure operations.

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